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Principles of Microeconomics - Essay Example

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Externalities are the incidental effects that a party gets due to another party’s actions (Mankiw, 55).This essay discusses a…
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Principles of Microeconomics
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Externalities Externalities are quite common today especially with the technological advancements that are experienced in almost all the sectors in the economy. Externalities are the incidental effects that a party gets due to another party’s actions (Mankiw, 55).This essay discusses a negative externality that a society gets due to the existence of a manufacturing firm in its neighborhood. Despite the manufacturing company bringing benefits to the society such as construction of roads and providing employment to locals, it has a negative impact to the society. One of the effects the company has on the society is the emission of its chemical waste into the society’s river.
The river which the company emits chemical waste has plenty of uses to the society. The society fetch water for domestic use from the river, practice fishing on the river and swim on the river for leisure. Emission of chemical waste onto this river pollutes it discouraging fetching of water for domestic use and swimming. This pollution also contaminate the water killing fish and other aquatic lives discouraging fishing which create income to some individuals in the society. Due to the seriousness of these adverse effects, the manufacturing company’s activities have to be controlled to reduce the impact of these effects.
The company itself can initiate projects to reduce these negative effects. The company can do that by cleaning the river to avoid contamination of the water. The company can also channel its chemical waste into another site or devise a good means of disposing them. In a bid to control this negative externality, the local government can impose rules and regulations that prevent the water pollution. Some of these laws will include heavy taxation of this company and charging it fines on water pollution. Regulations that control the disposing of waste in the water would also help the situation (Mankiw, 57)
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Work cited
Mankiw, N. Gregory. Macroeconomics. New York: Worth Publishers, 2007. Print. Read More
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